MEDIA RELEASE: Hard work isn’t enough for North Carolinians to climb out of poverty

Shift from manufacturing to services economy has created boom of poverty-wage jobs, new report finds

RALEIGH (February 27, 2014) — Sometimes working hard just isn’t enough to lift people out of poverty—that’s the reality for too many of North Carolina’s low-income workers, according to a new report from the Budget & Tax Center, a project of the NC Justice Center.

As we mark the 50th anniversary of the War on Poverty, the report finds that the persistence of economic hardship in North Carolina is largely due to a changing economy and the replacement of middle wage jobs in manufacturing with poverty wage jobs in the services sector. As a result, public investments in the safety net and economic development programs are often all that stand between low-wage workers and deep poverty. Far from failing, these are the programs that have lifted thousands of Tarheel workers out of poverty, the report finds.

“Fifty years into the War on Poverty, it’s never been clearer that economic hardship persists in North Carolina because the economy failed, not because the War on Poverty failed,” said Allan Freyer, Policy Analyst with the Budget & Tax Center and co-author of the report. “The best pathway out of poverty is a job that paves the way to the middle class through good wages, but those kinds of jobs are disappearing rapidly. As these job opportunities vanish, it’s no surprise that poverty continues to be a problem.”

Specific findings include the following:

A changing economy has replaced thousands of middle class jobs with booming poverty-wage jobs that don’t help workers make ends meet despite working full time. Since 2000, high-wage manufacturing employment in North Carolina fell by almost half, a larger drop than the national average and that of any surrounding state. Eight of the top 10 industries with the biggest job losses over this period were in manufacturing. At the same time, the serviced sector boomed, growing by 15 percent and generating an explosion of poverty-wage jobs, which often require little education and pay less than $23,484 per year. The total number of these poverty-wage jobs grew by 19 percent since 2000, the fastest category of jobs in the entire economy. At the same time, high-wage jobs—those paying more than $43,950 and requiring significant education—grew by 3 percent.

Working hard is failing to keep people out of poverty. Given the changing economy, full-time work is no longer enough to provide economic security to Tar Heel families or allow them to meet their most basic household needs. More than 3 in 10 workers in North Carolina earned wages at or below the official poverty line in 2012, up 23 percent since 2000, and the 8th-worst ranking in the nation.

“The new economy created thousands of jobs that pay too little to keep full-time workers out of poverty and offer fewer chances to improve their earnings over the course of a lifetime,” said Tazra Mitchell, a policy analyst with the BTC and co-author of the report. “As a result, household incomes have plummeted over the last decade, and the nation’s investments in helping families who have fallen on hard times is all that stands between too many and long-term destitution.”

Public investments in food assistance and tax credits for working families can support people as they work their way out of poverty. While the state’s poverty rate has jumped by more than one-third since 2000, it would have been much higher if services weren’t available to help struggling families make ends meet. For example, there would be 298,000 more people in poverty in North Carolina if not for the Earned Income Tax Credit. Similarly, SNAP lifted 200,000 families out of poverty, and unemployment benefits lifted another 50,000 out of poverty. These programs are now working overtime to make up the financial shortfall created by too few jobs and poverty-level wages

Unfortunately, state and federal lawmakers have cut the very programs that create good-paying jobs and help lift so many people out of poverty. Over the past three years, lawmakers cut public investments in schools, colleges, and job training, while simultaneously eliminating the state Earned Income Tax Credit. At the federal level, policymakers have allowed federal emergency benefits to expire for the long-term unemployed and agreed to cut $8.6 billion from SNAP over the next decade.